For physicians with 15 or 20 years left to work before retirement, the planning is easyÂÂ–as time is on their side. Adjustments can be made regarding savings rates, age of retirement, and future cash flow needs.
When retirement is imminent within three years, the planning options are limited, and physicians must become realistic about what is mathematically feasible as far as generating sustainable cash flow to support their lifestyle. Here are some issues for physicians who are facing retirement within three years or less.
Psychologically, this transition can be frightening for two reasons.
First, after spending a lifetime seeing patients every day, physicians suddenly will stop all work-related activities. They will face a full-time retirement with the uncertainty of what will keep them busy each day.
Second, for the first time since medical school, physicians will no longer receive a regular paycheck. Moving forward, accumulated savings and investments becomes their income. Suddenly, they are forced to spend savings.
Some questions that need to be asked:
• How much can I spend after taxes so my spouse and I will never run out of money throughout our lifetimes?
• Where should I take this cash flow from?
• Am I taking too much risk in my portfolio?
• Should I begin taking Social Security right away or wait?
These financial uncertainties can seem overwhelming. They are critical life-altering questions that need precise answers and must be carefully and thoroughly calculated.
Over the years, the slightest variations of an annual income can have a negative effect on the success or failure of not running out of money in retirement. As little as $10,000 per year in additional income can spell failure for a retirement plan.
Retirement brings up questions about long-term health care, estate and inheritance taxes, gifting, education of grandchildren, special-needs children or spouses, travel, second homes, monthly income needs, vacation planning, and incompetency issues. Waiting until a few months (or years) before retirement is not the prudent approach in planning for this phase of life.
However, if physicians are faced with a health-induced, immediate retirement, or are now retired and have never checked their personal circumstances via a well-planned analysis, it is never too late to have these calculations performed.